Texas Judge Rejects Most Support Briefs in DOL Fiduciary Litigation

Just two out of an increasingly large pile of amicus briefs
filed in relation to litigation seeking to halt the new DOL fiduciary rule will
be considered—both of them ostensibly pro-DOL in their argumentation.

In a short declaration explaining her decision, District
Judge Barbara M.G. Lynn notes these briefs, unlike those that will not be
considered, actually contain novel arguments compared with those presented by the plaintiffs and defendants. Her decision regarding the FPC
brief in particular also highlights the fact that the FPC has a unique perspective
to weigh in, since it is “the only filing party representative of financial
professionals in the United States already operating under a fiduciary
standard.”

“The court has discretion to consider amicus briefing where
the proffered information is timely and useful or otherwise necessary to the
administration of justice,” Judge Lynn writes. “In this case, both sides are
represented by sophisticated counsel, and the court has granted generous page
allocations for briefing. The court determines that Financial Planning Coalition’s
motion should be granted because its proposed brief provides a unique
perspective. The coalition is the lone amicus representative of financial
professionals in the United States already operating under a fiduciary
standard, and is therefore able to provide a practical perspective different
from that of the parties. Further, Coalition’s brief does not repeat arguments
made by either party.”

The FPC brief, it’s safe to say, is staunchly pro-DOL and
pro-fiduciary. The brief centers around three critical points of argument.
First, the coalition argues, investors currently suffer from a lack of complete,
truthful disclosures, and this is having a measurable negative effect on
retirement outcomes. Second, “empirical research and the coalition’s own
practical experience confirm that middle income investors will retain ready
access to professional financial advice under a fiduciary standard of conduct.”
And finally, based on CFP professionals’ experience under internal standards
similar to those required by the Best Interest Contract Exemption, the
coalition argues the rule provides “a workable solution to allow for advisers
to receive transaction-based compensation while providing advice that is in the
best interests of the client.”

Judge Lynn goes on to explain that American Association for Justice’s motion should also be granted full consideration, “because AAJ’s
brief focuses on a narrow legal issue related to the Federal Arbitration Act
and does not repeat arguments made by other parties.”

While this brief is certainly more narrowly focused than others, it can also be considered favorable to the
DOL’s arguments, with AAJ suggesting the fiduciary rule’s class-action provision “is
a valid exercise of the department’s authority that does not conflict with the
Federal Arbitration Act.”

“DOL acted well within its statutory authority when it
conditioned an exemption on the availability of class actions,” AAJ states.
Further, according to AAJ’s analysis, the rule is “fully consistent with the
Federal Arbitration Act … The rule does not preclude the enforcement of any
arbitration agreements … and covers only those who choose to invoke an
exemption … The rule can—and therefore must—be harmonized with the Federal
Arbitration Act’s policies.”

Judge Lynn concludes that “no amici will be able to present
oral argument at the hearing set for November 17, 2016.” The full text of her decision is here.